The world is changing, whether we like it or not. The first powered flight launched in 1903. In 1969, humans landed on the moon. Ford’s Model T first rolled off the production line in 1908, and by the 1930s, cars had replaced horses as the most convenient mode of transport. Lithium batteries are the next technological revolution, powering millions of cars worldwide. Here are two shares I’m looking to buy now.
Supplying the world’s largest lithium market
Savannah Resources (LSE: SAC) is my first share to buy now. It has massive potential due to its Portugal-based Mina do Barroso mining project. The company argues that it is “well established as Western Europe’s most significant spodumene lithium project.” In addition, “Savannah believes that there is significant potential for further resource definition.”
Two days ago, Savannah Resources joined the Portuguese Association for the Battery Cluster (BATPower) as a founding member. BATPower was coordinated by the International Iberian Nanotechnology Laboratory, an organisation set up and funded by the Spanish and Portuguese governments to help promote lithium power. This is a strong positive indicator for Savannah’s prospects. Furthermore, CEO David Archer has highlighted its research into new mining technologies that will reduce high underlying costs.
Europe, as a global car manufacturing hub, is the world’s largest lithium market. As the largest miner of the most important component of electric car batteries in Europe, Savannah Resources is well placed to take a massive market share as the EV revolution gets under way.
In 2018, the raw price for lithium reached an estimated $17,000 per metric ton, before falling to $8000 due to the effect of the pandemic on car manufacturing. However, it looks likely that the demand for lithium will only grow, though this is not guaranteed.
The bad news is that Savannah Resources shares were priced at 13.4p in June 2018, but tumbled with the price of raw lithium, and are now at 3.5p. However, it’s still a share I’d buy today.
A lithium-powered takeover?
Kodal Minerals (LSE: KOD) is my second share to buy now. It recently paid the mining licence application fee to begin work in the next few weeks at the Bougouni Lithium Project in Mali. Kodal predicts a production of 2550 kilotonnes of spodumene (lithium ore) over the next eight years.
I’d buy this stock primarily for its potential buy-out by Ganfeng. Ganfeng, China’s largest lithium producer, has a history of buying out lithium miners, recently taking complete control of Bacanora.
In addition, Ganfeng just purchased a 50% stake in the Goulamina Lithium Project for £93,500,000, securing 455 kilotonnes of spodumene over the mine’s lifetime.
Kodal’s market cap is currently £72,000,000. Ganfeng was prepared to pay over £20,000,000 more than this for less than a fifth of the lithium that Kodal currently controls.
The best news? The Bougouni Lithium Project and the Goulamina Lithium Project are geographically adjacent to each other.
The caveat is that this stock has quadrupled in the past two months to 45p today. However, for me, the long-term upside and potential buyout makes this a share I’d buy today.